04 Nov 2019

Botswana needs to establish a national economy with minimal vulnerability to external shocks which increases prospects for sustained growth, says Mr Moses Pelaelo.

Mr Pelaelo, who is Bank of Botswana governor, was speaking in an interview  with BOPA recently.

Macroeconomic stability, he explained, acted as a buffer against currency and interest fluctuations in the global market.

He cautioned that large swings in economic activity which included high inflation, unsustainable debt levels and volatility in exchange rates and financial markets could all contribute to job losses and increasing poverty.

The excess fragmentation of the diamond industry, he said, must be addressed to allow the sector as a whole to operate more effectively as it faced more trying times posed by the manufacturing of synthetic diamonds.

Mr Pelaelo stressed the importance of building economic resilience and economic diversification for the country to reduce its reliance on diamonds exports for economic growth.

“Botswana needs to grow and produce goods that are competitive in the global market, hence the need for tradable sectors to perform better in terms of productivity since they will solidify the country’s competitiveness in the global market,” he said.

He said the country needed to diversify the economy as the narrow economic base was exposing it to markets vulnerability.

Mr Pelaelo said another major challenge to Botswana’s economy was the decline in the level of reserves. 

He therefore emphasised the need to rebuild buffers to continually create new opportunities to ensure foreign exchange revenue sources were diversified to establish sufficient levels that could protect the local economy in the event of economic meltdown.

The low interests’ rate environment, he said,  had also created a problem in terms of vulnerabilities adding it was important to ensure infrastructural growth of and social spending were in accordance fiscal consolidation.

“Domestic resources mobilisation has to happen as part of the fiscal consolidation in order to avoid a decline in revenue,” he said.

Mr Pelaelo said revenue collection through taxation should be emphasised as the nation could not survive on economic grants. 

The country should refrain from over-dependence on diamonds export for revenue generation and strive to promote a robust tax collection campaign as well as the promotion of capital markets and private sector growth, he said. ENDS